Selective invoice finance

What it is, who it’s for, how much it costs – and what it can offer your business

The power to choose is one of the perks of being human. It adds spice to life, and is the reason that buffets exist. But the power to choose is also why selective invoice finance is becoming an increasingly popular solution for businesses all over the UK.

Read on for everything you need to know about selective invoice finance – and how it can help you grow your business.

What is selective invoice finance?

Selective invoice finance is a way of freeing up funds by selling one or more of your business’ unpaid invoices to a third party. This third party pays up a large percentage (sometimes the full amount) of the invoice value. When the outstanding invoice is paid, the lender takes a small fee. It then transfers you the remaining value of the invoice.

Selective invoice finance differs from traditional invoice factoring. How? By letting you sell just one (or a select few) of your invoices, rather than your whole sales ledger. It’s a simple and highly flexible way of getting a quick cash injection.

The benefits of selective invoice finance

✔ A bigger cash advance

Selective invoice financing deals typically pay out a larger percentage of the invoice value than with traditional invoice factoring. That means you get more cash upfront for your unpaid invoices, which helps ease the pain of those long (seemingly never-ending!) waits between payouts.

✔ Fast access to funds

Time is money – so when you need credit, you need it fast. Most selective invoice finance companies pay up within a snappy 24 hours, letting you pounce on tasty new opportunities for investment.

✔ A more flexible approach

One of the biggest selling points of selective invoice factoring is that you can factor as few invoices as you like. As opposed to selling your whole sales ledger (as with a traditional invoice factor), you choose the invoices you want finance for.

Plus, you can get finance as often – or as little – as you need. This not only saves you money, but gives you…

✔ Better control over your business

That’s right – selective invoice finance keeps control over your sales ledger firmly in your hands. Your customers won’t know you’re using an invoice finance company, so it’s easier for you to maintain those all-important client relationships, and provide consistent service across the board. Plus, you’ll still be in control of your credit management and all accounts receivable. Win win!

✔ Less commitment

When it comes to sorting finance, there’s little worse than getting roped into a long contract. Selective invoice factoring companies won’t tie you down with daunting deals. Forget the clauses, and just get the credit – as and when you need it. Selective invoice finance also comes with no monthly fees, no termination charges – and hopefully no worries!

The drawbacks of selective invoice finance

X Not suitable for smaller businesses

Selective invoice lenders base the level of risk on your customer base – not your business. That makes it more difficult for smaller enterprises and start-ups to be accepted, because they don’t always have the right clientele.

Selective invoice lenders often require you to be working with multi-nationals, or at least a wide range of proven, creditworthy clients. As a result, it’s better suited to large, established businesses.

X Not ideal for whole ledger factoring

The strength of single invoice factoring lies in not having to factor your whole sales ledger. So naturally, it follows that if you do want to get finance for your invoices on a large scale, it’s not the right service for you.

X Can be easy to become reliant on finance

While selective invoice factoring is hugely convenient, be warned: it can be easy to get stuck in a debt cycle, in which you’re relying on monthly funding to continue running your business.

This isn’t unique to selective invoice factoring – it’s a risk you face when you take out any kind of loan. But it’s still worth bearing in mind.

Is selective invoice finance right for your business?

Selective invoice finance is ideal for businesses with irregular sales and unpredictable income. It’s also a great option for businesses with a seasonal cash flow cycle.

Companies that trade with only one sizeable customer also benefit, as often they won’t have the required invoice volume needed for traditional invoice factoring.

Selective invoice finance providers

Next steps

So – you’ve been trading for at least a year, you have creditworthy customers, and have a good process in place for credit collection. But you also have unpaid invoices gathering dust, waiting to be paid – and you need a cash injection, fast.

If you were nodding while reading the above, then chances are selective invoice finance is for you. So what now?

Well, now you’re clued up on the ins and outs of what to expect, why not start comparing quotes from selective invoice finance lenders? Filling in our quick form is a no-cost and no-obligation way to get a bit more info about what to expect – from top industry suppliers.

Rob writes mainly about the payments industry, but also brings industry-specific knowledge of CRM software, social media monitoring, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny corner, with a beer and a battered copy of Dostoevsky.